Tuesday, 4 October 2016

Sydney now rubber-stamping units for fun

The ABS reported that Building Approvals remained resolutely strong in August 2016, with some 20,788 private sector dwellings approved, driven yet by another rebound in attached dwellings.

The trend in detached house approvals has declined by about 5 per cent since peaking in April 2015, while attached dwellings have just kept on trucking.

Over the year to August some 238,204 dwellings were approved, with the annual total levitating above 200,000 for 23 months on the bounce since October 2014.

Commentators have been calling for an end to the boom for, well, basically all of that time, but those pesky numbers just won't sit down.

City by city (moar apartments!)

Perth and Darwin continue to adjust to their respectively slowing markets, with house approvals accordingly in a steep decline.

Melbourne remains the city with the strongest trend in house approvals, which may be just as well given the awesomely strong population growth in that city.

Sydney has seen a number of monumental projects put forward for consideration over the past year, including a 10-tower monster being proposed for the site of the present Fish Markets, opposite the old Wentworth Park Dogs.

It's never entirely clear specifically which projects the ABS approvals figures relate to, but Sydney has approved an all-comers record 11,838 attached dwellings in only three months (wow-wee!).

Records are being zinged all over the shop here.

High rise kaboom

It's no particular surprise to note that the rebound has been driven by high-density apartment projects of four or more storeys - a high proportion of these will be sold to mainland Chinese - with approvals for most other dwelling types in a steady decline.

While Victoria may have seen a number of high-rise projects pulled forward into FY2015/16 due to planning changes, New South Wales is rubber-stamping projects for fun right now (although whether all of these approvals come to fruition is another thing).

The wrap

The approvals figures have elicited quite a lot of excitement, although the completions delivered to date have been far less arousing.

The Housing Monitor reported that Sydney saw a total of 30,191 houses and apartments completed during 2015/16, which was the strongest result since 1999/2000 (which if anything just underscores how long it has been since Sydney constructed a decent number of dwellings).

This sounds quite impressive until you compare it to the hugely strong population growth of the Greater Sydney region over the same time period.

Unsurprisingly, the impact on price growth was precisely zip, with dwelling prices rising by about 10 per cent.

However, the key characteristic of this construction cycle is the lag - and apartment completions will increase further in 2016/17. In fact, a lot further.

The figures clearly continue to show that the delivery of this glut of high-rise projects is the most at-risk sector of the market.